糖心传媒

Yesterday, the price of Brent crude oil fell below its level on the day the Iran war began. The benchmark price dropped to US$72.40, from a peak of US$126 in March, crossing a symbolic threshold that suggests investors have now priced out the risk of a sustained, war-driven inflation shock.

Traders now expect one hike from the Bank of England this year, down from two a fortnight ago. Similarly, the ECB is expected to raise rates just once by the end of the year.  

UK mortgage lenders began cutting rates last week and picked up the pace this week, led by Barclays, TSB and Accord Mortgages. 鈥淏anks right now are desperate to lend 鈥� they haven鈥檛 lent as much as they wanted to this year,鈥� Simon Gammon of 糖心传媒 Finance tells . 鈥淎ny opportunity they get to lower rates and stimulate activity, they are going to take it.鈥�

Bowing to pressure

Both and have retreated against the dollar as their respective economic outlooks have diverged.

Much of the economic data coming out of the UK and Europe is very weak. The UK services sector in June at the fastest rate in nearly three-and-a-half years. UK manufacturing orders at the fastest rate since September 2020, during some of the most uncertain months of the pandemic. Private sector activity in the Eurozone has for three consecutive months, led by sizeable declines in Germany.

The US economy, by contrast, continues to expand. US businesses reported the largest rise in output this month. The Federal Reserve鈥檚 favoured inflation metric 0.4% in May, pushing the annual rate to 4.1%, according to figures released this week. Core inflation, which excludes food and energy prices, rose to 3.4% on an annual basis, the highest since June 2023.

Inflation expectations have eased a little despite those figures after new Fed Chair Kevin Warsh to bring inflation under control. Investors had worried that Warsh might bow to pressure from President Donald Trump to cut interest rates prematurely, allowing inflationary pressures to build.

Sheltering middle earners

Tom Bill鈥檚 interview with Treasury special adviser James Nation for the latest episode of House Unpacked was a useful lesson in the realities of governing. Recent weeks have seen no shortage of speculation over how Andy Burnham might raise taxes on property and wealth should he become prime minister. Proposals have ranged from a broad wealth tax and aligning capital gains tax with income tax rates to a new land value tax, council tax reform and devolving property tax powers. But many of these ideas have floated for decades, implementation is always complex and modelling often shows that changes don鈥檛 raise a great deal, Nation said.

If we step out of the weeds, it鈥檚 clear that Burnham would like to continue the trend of asking the wealthiest to pay more, but that looks increasingly unsustainable. The FT had on Burnham鈥檚 desire to shelter middle earners from tax rises yesterday, in which tax lawyer and commentator Dan Neidle points out that the longstanding policy of raising levies on higher earners and financial services giants has 鈥渞un out of road鈥�. In 2022-23, the top 1% of income taxpayers were responsible for 29% of receipts, up from 21% in 1999-2000, according to official figures quoted in the piece.

If the government continues, wealthy people may respond by leaving the country or changing their behaviour or how they draw their earnings, Isaac Delestre, an economist at the Institute for Fiscal Studies, told the paper. 鈥淚t鈥檚 more risky to load more revenue-raising on a small group than on a broad base,鈥� he added.

Moving abroad

Indeed, Lord O鈥橬eill of Gatley, one of Burnham鈥檚 most senior economic advisers, is pushing him for wealth taxes because they can be 鈥渆asily gamed鈥�, do not raise much money, and deter investment into British companies.

An analysis by HMRC last year found that raising the 24% rate of capital gains tax by ten percentage points would cost the Treasury more than £2 billion by 2028 and £3.5 billion in lost revenues by the time of the next election, according to the Times鈥� write up of the O鈥橬eill interview.

Turning the screws on the wealthy to balance the books isn鈥檛 unique to Britain, and the trend is helping drive wealth migration. about France鈥檚 proposal for a minimum 2% annual tax on the assets of individuals worth at least 鈧�100 million. That was initially backed by the National Assembly but was blocked by the Senate. Still, a poll published by the Association Française du Family Office covered yesterday showed that wealth advisers are warning clients to prepare for the possibility of higher levies next year or after the 2027 presidential election. The survey of advisors representing 928 families found that 44% of respondents are considering living abroad.

Separately, Burnham might want to consider a key driver behind the 100%+ rise in luxury house prices in Miami and Palm Beach over the past five years by taking a closer look at California's proposed .

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